The study by Fama and French maintains that the lower the ratio of market value to book value, the:
A)more overvalued the stock price.
B)higher the potential return on the stock.
C)higher the expected growth in earnings.
D)lower the expected growth in earnings.

Question

Quizplus · Accepted Answer

Professors Fama and French maintain that the ratio of book value to market value and size are more important than P/E ratios, leverage, or other variables in explaining stock market performance. The Fama-French study says that the higher the ratio of book value to market value (the lower the ratio of market value to book value), the higher the potential return on the stock.

The Study by Fama and French Maintains That the Lower